XPeng Motors: Driving the future of electric vehicles

Guangzhou-based XPeng Motors is transforming the Smart EV market through technology and data innovation. Co-founder, chairman and CEO He Xiaopeng explains what sets the company apart and why it’s poised for long-term success in a highly competitive and rapidly developing industry

Founded in 2015 with the aim to shape themobility experience of the future, XPeng Motors designs, develops, manufactures and markets smart electric vehicles (Smart EVs) in China. The company, already a proven leader in this rapidly growing market, produces the G3 SUV and P7 four-door sports sedan. Its third production model, the XPeng P5, the world’s first production Smart EV-equipped car with automotive-grade LiDAR technology, launches on September 15. All are seamlessly integrated with advanced Internet, AI and advanced driver assistance technologies while offering safety, reliability, high performance and attractive designs.

Developing and producing such innovative vehicles in just six years requires an incredible level of in-house R&D, intelligent manufacturing and cross-sector leadership. Henry Xia, He Tao and He Xiaopeng are XPeng’s co-founders, with He Xiaopeng serving as chairman and CEO. The Hubei-born He, who graduated from the South China University of Technology with a bachelor’s in Computer Science, co-founded web browser company UCWeb, which was subsequently acquired by Alibaba Group. He also served as senior executive of Alibaba Mobile Business Division for three years before joining XPeng full-time in 2017. The chairman and CEO tells us more about XPeng and where it fits within the constantly evolving EV industry.

XPeng Motors is an industry newcomer with a short history. Will that be an issue going forward?
Actually, I think it’s great. There are many new consumer brands in China, but XPeng has focused its branding on intelligence. Most Chinese carmakers are not planning on taking their brands overseas, especially into the global consumer auto market, the ultimate competitive consumer sector. For us, it’s a matter of zero-to-hero. While this process is underway, the one who has the best technology and the best innovation has the greatest value. I’m not worried. I’m very happy to be able to compete in this completely new race.

Is 2021 an especially critical year for XPeng?

I don’t think so. I concentrate most on long-term development, and technical and product innovation. Next is building scale. Exactly how much scale will bring profit? Most of the time, that’s decided by the companies themselves. For us, if we want to compete globally, R&D is indispensable. This year, we will more than double last year’s R&D investment, and I think we will also invest a lot next year. The R&D investment is for 2025 when the contest moves from the qualifiers to the knockout round. That is what I’m targeting.

What is XPeng’s market position and what are its competitive strengths?
My goal is to make mid- to high-end cars. Our cars’ prices are between 150,000 and 400,000 RMB. Our sales numbers allowed us to reach a gross margin of more than 10 per cent with this price range – it’s already pretty good. Most auto sector companies in China have a gross margin of 10-20 per cent; but they have a much larger scale than XPeng, and we are confident that our scale will grow tremendously once the market improves, and our gross margins will likewise improve.

Some of our auto company peers have really good gross margins, mainly because they target high-end customers, but their scalability will hit a bottleneck within a few years. I’m already seeing this. So it doesn’t matter who has the best initial gross margin; what’s important is the long-term goal. We don’t pursue the entire operation’s profitability; we focus on our products’ gross margin, both hardware and software.

Our last quarter’s financial report showed that for the first time our autopilot software has earned over 80 million RMB. This product’s gross margin is rather good. So I think this trend is just beginning. Software has steadily improving gross margins. As this continues, I see it creating new products and business models.

What’s your view on some analysts’ statements that China’s fast-developing EV industry is creating a bubble?
I think there’s no bubble so long as there’s demand in the market. In the coming five to 10 years, I see us entering an active mobile Internet era, where mobile devices will be on the move, among them the car. It’s a combination of hardware, software, the Internet and offline service scenarios. That’s a massive market.

But in the next three to five years, things might look like the situation with the first generation of Chinese electric vehicle start-ups. The number of electric car companies may go from hundreds to just a few. I think it’s a painful but also necessary process.

Many Internet giants are entering the EV industry. How will that impact XPeng?
Competing with strong global competitors will make us stronger. Eventually, there will only be a handful of smart car companies left in the global market, like today’s smartphone market. We can each take a sizable share, and between us hold most of the market. In terms of the supply chain and R&D ecosystem, as more talents are joining the industry, they will become the basis of the talent pool for the future.

For customers, this means that completely innovative smart electric cars will come to market sooner. It’s a process in which everybody wins.

You started off as an entrepreneur in the Internet sector, with the creation of UCWeb. What inspired you to move into smart mobility?
Ironically, it was the Hasbro Transformers series, which ran on TV when I was growing up in Hubei. There you had these sentient, autonomous robots that transformed into vehicles. That left a lasting impression, and eventually inspired me to look into combining machine intelligence with mobility.

Do you watch XPeng’s stock performance closely, now that the company is listed in both New York and Hong Kong?
As I run the business, I look at the company’s long-term development; the stock market and secondary market fluctuations are short-term. I basically don’t look at the secondary market. As the founder of a company, I need to be there for the long term, and do things well step by step. That’s the most important thing. I won’t make certain moves just for short-term gain.

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